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Bank of Canada Defends Rate Hike Ahead of November 5 Federal Budget
Bank of Canada defends its rate hike ahead of the November 5 federal budget.
Key points
- The Bank of Canada raised its policy rate by 25 basis points to 2.5 per cent last week, the first increase since July 2023.
- Governor Tiff Macklem said higher oil, gasoline and diesel prices tied to the Middle East war are hitting Canadians and businesses.
- The federal budget due November 5 is expected to include tax incentives for small and medium-sized businesses to reinvest.
Why it matters. The rate increase could mean higher payments on some mortgages and other loans, and Macklem said cost pass-through to businesses and consumers will increase over the next year.
Governor Tiff Macklem defended the Bank of Canada's rate increase last week before a House of Commons finance committee on Tuesday. The policy rate rose 25 basis points to 2.5 per cent, the first increase since July 2023, because elevated energy prices could spill over into generalized inflation. Senior Deputy Governor Carolyn Rogers said lower rates might help investment incentives, but not if inflation rose, ahead of the federal budget due November 5.
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Bank of Canada Defends Rate Hike Ahead of November 5 Federal Budget
The Bank of Canada is standing by its decision last week to raise its key interest rate for the first time in three years. Governor Tiff Macklem defended the move on Tuesday before the House of Commons Standing Committee on Finance. The increase means many Canadians and businesses will pay more on some mortgages and other loans. The federal government plans to release its next budget on November 5. That budget is expected to include tax incentives encouraging small and medium-sized businesses to reinvest. Markets and households will be watching how the budget interacts with the central bank's tighter stance.